Can aged care assets buoy Singapore Press Holdings?

Its acquisitions in Japan and Canada would enlarge its recurring income base.

Singapore Press Holdings’ (SPH) recent acquisitions of global aged care assets have boosted its facilities by 365 beds (from Japan) and 717 suites (from Canada). The first acquisition was in Japan with five properties (three in Hokkaido, one in Nara, one in Tokyo) for $65.8m, whilst the second was in Canada (five in Ontario, one in Saskatchewan) for $244.5m.

According to a report by UOB Kay Hian, these transactions should enlarge its recurring income base and complement its aged care operations at Orange Valley in Singapore. “The latest acquisitions add a real estate component as opposed to Orange Valley build-own-lease model,” said UOBKH analyst Lucas Teng.

SPH’s new assets also provide the firm with some defensive play, as the Japanese assets have a cap rate of close to 5% on average, whilst that for the portfolio could range 5-6%.

“At current share price levels, SPH provides an attractive dividend yield of 5.8% with a growing base of recurring income from defensive assets - aged care and student accommodation - which are more resilient to economic downturns,” Teng said.

The situation around ageing demographics in these markets could also be in SPH’s asset favour. Hokkaido’s seniors above 70 years old make up about 20% of its population, whilst the proportion of the population aged 65 and above in Ontario could increase from 16.9% (2018) to 21.2-26.1% in 2043.

The group’s expansion into aged care business overseas leverages its operator knowledge at Orange Valley, with asset ownership offering some downside protection. “The latest acquisitions may suggest more additions in cash-yielding assets in defensive sectors,” Teng added.

Relief from COVID-19
On the media side, increased health advisory advertisements from COVID-19 in the local newspapers could help to provide some temporary relief to the decline in SPH’s media business.

“Our page count of 20 February Straits Times suggests that the pace of decline has diminished from the double-digit percentage seen in 2019. Excluding one-off costs, media constituted about 20% of group operating profits in 1QFY2020, compared with 42% in 1QFY2019,” Teng added.